Korea plans to beef up efforts to curb the growth of household debt and mend the practice of extending home loans in a bid to prevent household indebtedness from increasing market instability, the financial watchdog said Tuesday.

Korea’s household debt stood at 801.4 trillion won ($738.2 billion) as of the end of March, accounting for 86 percent of the country’s gross domestic product. The number was higher than the average of 77 percent for members of the Organization for Economic Cooperation and Development.

The Financial Services Commission said it plans to unveil a set of measures to stem the fast growth of household debt this month in an effort to tackle potential market instability.

The financial watchdog said it plans to make efforts to adjust the growth pace of household debt and induce local financial firms into extending home loans with fixed lending rates.

The government also plans to encourage more households to mend the practice of only repaying interest on their mortgage loans without paying out principal for an extensive period of time, it said.

Snowballing household debt has emerged as a headache for Korean policymakers because rising interest rates will crimp households’ capacity to service debt. The country’s central bank hiked the key interest rates to 3.25 percent last week, the third rate increase within this year, in a bid to tame inflation. 

(Yonhap News)